Download Syllabus

S. Margolis
Fall 2012
North Carolina State University
Economics 413
Monopoly, Competition and Public Policy
This course is about the causes and consequences of big business and the public policies
that address monopoly power. In the course we ask: Why are firms as big as they are?
What are the consequences of having large firms in the economy? How does monopoly
power arise and how important is it in the economy? Why do governments grant private
monopolies? This collection of topics is also called Industrial Organization.
Much of the course is concerned with antitrust policy. In fact, one incomplete but not
completely inaccurate definition of industrial organization is the economics of antitrust.
Throughout modern commercial history, our newest technologies have often resulted in
reorganization of the economy. That reorganization often includes the arrival of new large
firms and new business practices. Such developments prompt concerns about the power of
large companies, and in response, new antitrust initiatives. Microsoft’s antitrust problems
in the U.S. ten years ago and its continuing problems in Europe today are important
examples. More recently, Google has become the target antitrust investigations, with
Google’s critics using many of the same arguments that were used against Microsoft.
Intellectual property—patent, copyright, and trademark—is also a part of industrial
organization, but until recently it has been a distant second to antitrust. Over the past
decade, however, IP law has become a more visible and more important public policy
issue. Apple v. Samsung now takes center stage, likely a warm up for legal challenges to
Google’s Android operating systems.
Similarly, technology changes have raised public policy issues regarding the regulated
industries and their descendents—mostly telecommunications. We will spend some time
looking at those industries.
OPERATIONS
There is no textbook for the course. I have prepared a coursepack that is available at Sir
Speedy. Details will be presented in class. You are also expected to have access to the Wall
Street Journal. You will also be asked to read court cases and other material which you will
be able to access on line.
I will occasionally communicate with the class by e-mail and I will expect that you have
access to e-mail and read it daily. You will be held responsible for announcements that are
communicated by e-mail. You should ensure that the university has your current e-mail
address. I will also have a simple web site for the course and may, on occasion, distribute
class materials through the web site.
OFFICE: My office is 4156 Nelson Hall. My phone number is (919) 513-2565. The fax
number is (919) 515-7873. My e-mail address is [email protected]. Office hours
are Tuesdays and Thursdays from 3:00 to 4:00 and by appointment. I also encourage
questions and discussion by e-mail. The course website is accessed from
www4.ncsu.edu/~margolis.
Grades in the class will be based on a midterm (25%), four or five short assignments or inclass exercises (10% total), a short paper (20%), class participation (10%) and a final
(35%). Plus and minus grading will be used. The short assignments will be in the form of
problem sets or short written exercises.
ACADEMIC INTEGRETY: I will assume that you are aware of NC State policies on
academic integrity. Unless I explicitly state otherwise, all work submitted in the course is
to be your own work. If you are unaware of the academic integrity policy you should
consult the University’s policy statement at
http://www.fis.ncsu.edu/ncsulegal/41.03-codeof.htm
MOBILE PHONES
Please turn your phone off when you come to class. If you must leave class to take a call,
please do not return to class.
ELECTRONIC COMMUNICATIONS: I expect that you receive and regularly read email. I will use the university’s e-mail distribution list for this class, so please be sure that
the address that you have listed with the university is the one that you regularly read.
Students will be held responsible for attending class and finding out about all assignment
and test dates.
The final examination for this course will be held on Tuesday, December 11, in the
morning session.
Course Outline
* Denotes optional readings
Part One. Five models for industrial organization.
1.
Competition.
Readings:
Landsburg, Steven. Price Theory and Applicaitons,
Chapter 6. (Or any other intermediate
microeconomics chapter on long and short run cost
curves, competitive equilibrium.)
Margolis. "Concepts of Competition for Managers"
(Coursepack)
2
Alchian, Armen. “Evolution, Uncertainty, and
Economic Theory.” Journal of Political Economy,
June, 1950. 58 (3) 211-221. (Coursepack)
Hayek, Fredrick. “The Meaning of Competition,”
from Individualism and the Economic Order, 1948.
2.
Simple Monopoly and Price discrimination
Reading:
3.
Landsburg, Chapter 10. (Or any other intermediate
textbook for a review of Monopoly)
Natural monopoly and rate-of-return regulation
Reading:
Landsburg, Chapter 10, pages 323 (Rate of return
regulation) and 325-27 (Or other intermediate micro
textbook)
* Kahn, Alfred. The Economics of Regulation.
Chapters 1& 2
4.
Oligopoly
Reading:
5.
Margolis: “Anybody’s Oligopoly Book,”
(Coursepack)
Networks and network effects
Readings:
Liebowitz and Margolis, Winners, Losers, and
Microsoft, Chapter 1 (Coursepack)
Liebowitz and Margolis, “The Fable of the Keys,”
Journal of Law and Economics, April 1990. pp 1-25
(Coursepack)
Part Two. Monopoly effects: What do we know and how do we know it?
1.
Organization of industry data
Readings:
(See: http://www.census.gov/epcd/www/naics.html)
U.S. Census Bureau, Census of Manufacturing,
Concentration Ratios. (Handout)
3
2.
Profits across industries
Readings:
Pages 161-188 in Donald Waldman and Elizabeth
Jensen, Industrial Organization. (Coursepack)
Demsetz, “Industry Structure, Market Rivalry, and
Public Policy,” Journal of Law and Economics, 16(1)
April 1973. pp. 1-9. (Coursepack)
Part Three. Policy
1.
Antitrust
Readings:
Margolis, Antitrust Cases: (handout)
Barry Wright v. ITT Grinnell Corp. 724 F.2d 227
Verizon Communications v. Law Offices of Curtis V.
Trinko, LLP (2004) (Coursepack)
Leegin Creative Leather Products, Inc., Petitioner, v.
PSKS, Inc., DBA Kay’s Closet. (2007)
http://www.law.cornell.edu/supct/pdf/06-480P.ZO
2.
Intellectual Property
Readings:
Posner, Richard, “The Law and Economics of
Intellectual Property,” Daedelus Sp. 2002 pp. 5-12
(Coursepack)
An IP primer: (Available on-line, details to follow)
Part Four. Theory of the Firm
Readings:
Margolis, "The Costs of Transacting and the
Organization of Firms," (Coursepack)
*Coase, R.H., “The Problem of Social Cost,” Journal
of Law and Economics, October 1960. (Optional, but
you should look at this if you haven’t read it. Find it
through the library site at JSTOR (www.jstor.org)
Coase, "The Nature of the Firm" Economica 1937
(Coursepack)
4